The short answer
Set aside 25 to 30% of every payment you receive. For most Canadian freelancers earning a typical self-employment income, that range covers your income tax plus your Canada Pension Plan contributions, with a little buffer. Move it into a separate account the day the money lands, treat it as gone, and you'll have the cash ready when your tax bill and any instalments come due. If you earn more, or you're in a higher-tax province, lean toward the top of that range or a bit above.
The number isn't a guess pulled from the air. Here's what it's actually covering.
Why 25 to 30%, and what does it cover?
Your set-aside has to cover two things nobody deducts for you, and eventually a third.
The first is income tax. As an employee, tax comes off every paycheque before you see it. As a freelancer, none of it does. Every dollar a client pays you arrives whole, and the tax on it is still owed. Canada taxes income in brackets, so the rate climbs as you earn more, which is exactly why the set-aside is a range instead of a single number.
The second is the Canada Pension Plan. This is the part that surprises people. Employees split CPP with their employer, each paying half. A self-employed person pays both halves, so the self-employed CPP contribution rate is 11.9% on your net business income above a small basic exemption, up to an annual maximum. That's a real cost that lands on top of your income tax, and it's a big reason a "just cover income tax" set-aside comes up short.
The third is GST/HST, but only once you register for it. Until then it isn't part of your set-aside at all. More on that below, because it works differently from the other two.
Add income tax and both halves of CPP together for a typical freelance income, and you land in that 25 to 30% zone. Earn a lot in a high-rate province and it can run higher, which is why the safe habit is to skim a consistent percentage off the top of every payment rather than trying to calculate it perfectly in the moment.
Should I put it in a separate account?
Yes, and this is the single most effective habit in freelance money management. Open a second account, and the moment a client payment lands, move your set-aside percentage into it and pretend that money doesn't exist. Do not treat your business chequing balance as your income. The balance you see is not what you earned, because a quarter of it belongs to the government.
Freelancers who skip this step aren't bad with money. They're just carrying tax cash in the same account they spend from, which makes it feel available right up until the bill arrives. A separate account removes the temptation and the panic in one move. Automating the transfer, so it happens without you deciding each time, removes the last bit of willpower from the equation.
When do I have to pay it, all at once or in instalments?
For your first year or two, you'll usually pay your tax in one lump sum when you file. Once your tax owing gets large enough, the CRA switches you to quarterly instalments, meaning you pre-pay the coming year's tax in four chunks across the year instead of settling up once at filing. They'll send you instalment reminders when you cross that line.
This is where the separate account quietly saves you. A freelancer who's been skimming 25 to 30% into a dedicated account all year already has the instalment money sitting there. A freelancer who spent it faces four surprise bills. Same income, completely different stress level, and the only difference is the habit.
Does GST/HST change my set-aside?
It's separate, and you should treat it that way. You only register for and start charging GST/HST once your taxable revenue crosses $30,000, measured over a rolling four-quarter period rather than a calendar year. Below that line, GST/HST plays no part in your set-aside.
Once you are registered, the tax you charge clients isn't your money at any point. You collect it on top of your fee and later send it to the CRA, minus the GST/HST you paid on your own business expenses. The cleanest way to handle it is to route that collected sales tax into its own account, kept apart from both your income and your income-tax set-aside, so you're never spending money you're only holding on behalf of the government. Three buckets: what you earned, your income-tax-and-CPP set-aside, and collected sales tax. Keep them separate and tax season stops being a scramble. If your clients are in more than one province, which rate you charge depends on where they are, which is worth sorting out before your first taxed invoice.
What if I set aside too much?
Then you've built yourself a refund or a head start on next year, and that's a good problem. Over-saving costs you nothing but a little liquidity you can reclaim after you file. Under-saving costs you a bill you can't pay, interest, and the stress of borrowing from next month to cover last year. The math is lopsided on purpose: the downside of saving too little is far worse than the downside of saving a bit too much, so when in doubt, round up. A freelancer who set aside 30% and gets some back in April is in a far better spot than one who set aside 15% and owes.
How Loot helps
Loot won't file your taxes, and it's honest about that. What it does is keep the record clean so the set-aside is easy and the filing is fast. Every invoice you send and every payment you collect is tracked in one place, GST/HST sits as its own clearly labelled line once you're registered, and you can export the whole year as a clean CSV when it's time to hand things to an accountant or fill out your return. It works the same whether you're invoicing under your own name as a sole proprietor or you've decided to incorporate. Because payments settle through Stripe Connect and land straight in your own account, you see your real income the day it arrives, which is exactly when the set-aside habit works best. The tool that gets you paid and the tool that keeps you ready for tax season are the same tool, so nothing falls through the gap between them.
Frequently asked questions
How much should I set aside for taxes as a self-employed person in Canada? Set aside 25 to 30% of every payment you receive. That range covers income tax plus both halves of CPP for a typical freelance income. If you earn more or live in a higher-tax province, lean toward the top of the range or slightly above, and move the money into a separate account as soon as each payment lands.
Do freelancers pay CPP in Canada? Yes. A self-employed person pays both the employee and employer halves of the Canada Pension Plan, so the self-employed contribution rate is 11.9% on net business income above a small basic exemption, up to an annual maximum. It's owed on top of income tax, which is why a set-aside that only covers income tax falls short.
Should I keep taxes in a separate bank account? Yes. Moving your set-aside percentage into a dedicated account the moment a payment lands, and treating it as spent, is the most effective habit for avoiding a tax-season cash crunch. Automating the transfer removes the willpower from the decision.
Do I include GST/HST in my tax set-aside? No, keep it separate. You only charge GST/HST after your taxable revenue crosses $30,000 over a rolling four quarters, and the tax you collect is never your money. Route it into its own account, apart from your income-tax set-aside, and remit it to the CRA minus the GST/HST you paid on business expenses.
When do I have to pay tax in instalments as a freelancer? Most freelancers pay a lump sum at filing for the first year or two, then the CRA switches them to quarterly instalments once their tax owing passes a threshold and sends instalment reminders. A consistent set-aside habit means the instalment money is already waiting instead of arriving as a surprise.
This is general information for Canadian freelancers and no substitute for tax or accounting advice. Your actual tax depends on your income, your province, your expenses, and your personal situation, and rates and thresholds change, so confirm your own numbers with a qualified accountant or the CRA before you file. For more on the tax side of freelancing, our guides walk through GST/HST and registration.